QL Resources (QL) FY23 revenue jumped by 19.6% YoY supported by greater contribution from the Marine Product Manufacturing (MPM) segment (+16% YoY), ILF segment (+24% YoY), and Convenience Store (CVS) segment (+36% YoY). Consequently, PATAMI soared by 59.6% YoY with margin improved to 5.5% (+1.4 ppts YoY). Overall, the result was inline with our and consensus’ expectations, accounting 100% and 99% of full year forecast. We expect a resilient outlook for QL in FY24, with ongoing growth especially in MPM and ILF segments offsetting potential weakness in other segments. We have a BUY call on QL with unchanged SOP-derived TP of RM6.30, which implies FY24F PER of 41x.

• Within expectations. QL’s FY23 net profit of RM346.8mn (+59.6% YoY) was in line with ours and consensus expectations accounting 100% and 99% of full year forecast respectively.

• Dividend. The board has proposed a final single-tier DPS of 3.50sen for FY23 (FY22: 3.50sen), translating into a DY of 0.6%.

• QoQ. QL’s 4QFY23 revenue was soft, falling by 9% to RM1.5bn as 4Q is historically its weakest quarter on account of the monsoon season. Both MPM and ILF segment decreased by 15% QoQ, offsetting the increase in palm oil and clean energy (POCE) segment (+24%). PATAMI declined further or by 25% to RM73.3mn with a slight erosion in PBT margin (-0.4ppt QoQ) coupled with higher effective tax rate of 30.8% (+8ppts QoQ).

• YoY. Revenue increased by 8% YoY driven by higher contributions across all segments namely MPM (+10% YoY), ILF (+7% YoY) and CVS (+25% YoY). PBT jumped higher by 21% YoY mainly due to improvement in margin in two segments which are i) ILF segment (+2.6 ppts) helped by higher production volume as well as efficiency from layer and broiler operation, and ii) POCE segment (+5.3 ppts) due to project margin recovery at Boilermech. Nevertheless, PATAMI level only increased by 6% mainly curtailed by higher effective tax rate.

• YTD. FY23 revenue jumped by 19.6% to RM6.3bn supported by greater contribution from MPM (+16% YoY), ILF (+24% YoY), and CVS (+36% YoY) segments. Consequently, PATAMI soared by 59.6% YoY with margin improving to 5.5% (+1.4 ppts YoY).

• Outlook. We are optimistic on QL’s future growth, premised on higher export demand for surimi based products and stable demand of chicken eggs as well as margin improvement from removal of the eggs price ceiling reportedly by end of June. However, CVS segment could see slower earnings growth in the near-term, on dampened consumer spending given persistent inflationary environment.

• Our call. We have a BUY call on QL with unchanged SOP-derived TP of RM6.30, which implies FY24F PER of 41x. We continue to like QL due to i) its strong brand name with stable earnings track record, ii) defensive nature of its businesses, and iii) high compliance to Halal standards.

Source: BIMB Securities Research - 31 May 2023